MWSS, water firms to ‘sanitize’ contract
Credit to Author: Catherine S. Valente, TMT| Date: Fri, 20 Dec 2019 16:15:30 +0000
THE Metropolitan Waterworks and Sewerage System (MWSS) said it was trying to come up with a new agreement with Manila Water Co. Inc. and Maynilad Water Services Inc. that would be free of the provisions that President Rodrigo Duterte had deemed onerous.
In a statement on Friday, MWSS Administrator Emmanuel Salamat said the “MWSS and the concessionaires will exert all necessary efforts to comply with the directive of the President to execute a new water concession agreement after 2022 which is currently being drafted by the Department of Justice.”
Duterte had ordered a review of the contracts of the two concessionaires, saying they had provisions that were inimical to the government.
In line with the President’s directive, the MWSS revoked a board resolution that extended the contracts with the two firms from 2022 to 2037.
Salamat, however, made it clear that the 25-year concession agreements with Manila Water and Maynilad remained “valid and subsisting contracts.”
“This action of the board did not result in the rescission or outright cancellation of the said contracts, which requires a separate and distinct act to be legally effective,” he said.
“In addition, and consistent with the clarificatory pronouncements made by the government, MWSS has been expressly directed to renegotiate the concession agreements with Manila Water and Maynilad in order to remove the illegal and onerous provisions of the same as determined by the Department of Justice, as well as to include such other provisions that are beneficial to the consumers and the entire nation,” Salamat added.
He said the MWSS appreciated the cooperation extended by both concessionaires not only in expressly declaring that they would no longer collect or claim their respective arbitral awards, but also in their expressed willingness to renegotiate the “inequitable” provisions of the agreement.
The government lost cases filed by Manila Water and Maynilad with a Singapore arbitration court, which ordered the government to pay them more than P10 billion in damages.
In the latest case, the Permanent Court of Arbitration in Singapore directed the government to pay the Ayala-led Manila Water P7.39 billion for incurred losses. In 2017, the tribunal ordered the government to pay Maynilad P3.4 billion for not allowing the firm to raise rates.
The cases riled Duterte, who threatened to let the military run Metro Manila’s water distribution system.
The Justice department also ruled that the companies would be replaced as water service providers. It said it intended to finish the revised draft before the end of the month and present the amended agreement to the Cabinet by January next year.
On Friday, Palace spokesman Salvador Panelo said the President would make a major announcement on the water distribution issue on January 6.
Panelo did not provide specifics, but he assured the public that Duterte remained determined to resolve the issue before the end of his term in 2022.
Earlier, the spokesman said the President was still keen on meeting with the officials of Manila Water and Maynilad, but a date has not been fixed.
“I think he said, ‘I do not know whether I will survive this. But I will not allow this to happen.’ I think what he meant is, he will not step out of the presidency without resolving this issue,” Panelo added.
Duterte has also instructed Presidential Anti-Corruption Commission Commissioner Greco Belgica to look into the legality and constitutionality of the water concession agreement.
Belgica pointed out that Article 2 Section 2.1 of the Concession Agreements provides the roles and functions granted by MWSS to the private corporate concessionaires. They are: (a) to act as contractor to perform certain functions; (b) to act as agent for the exercise of certain rights and powers under the MWSS Charter; (c) the sole right to manage, operate, repair, decommission and refurbish the facilities in the service areas; and, (d) the rights and powers to bill and collect for water and sewerages supplied in the service area.
Belgica said he found out that the roles and functions of the concessionaires were muddled by conflicting terminologies meant to hide the intent that the agreements are actually a disposition, transfer or sale of the MWSS franchise.
“The right to operate the franchise is already transferred, sold or disposed of to the private-corporate grantee of the concession, which is the franchise and such ‘grant of concession’ was done without payment to MWSS the valuable consideration represented by the appraised value of the fixed assets and the value of the franchise itself. The confusing and conflicting roles and functions of the ‘concessionaires’ are what are questionable, particularly the sole right to operate the franchise of MWSS have already been devolved to the private corporate concessionaires, which included the right to bill and collect for water and sewerage services supplied in the service area of the consumers.” he said.
“MWSS itself cannot conclude on its own, the privatization of its franchise. While it may initiate such privatization, the Concession Agreement cannot be made valid, effective and enforceable without the approval of the Congress of the Philippines.” Belgica added.
He also pushed for the classification of the concessionaires as public utilities and not as mere “agents,” considering that such classification has a direct impact on how these public services are operated, compensated and taxed.
“As a result of the erroneous classification of the concessionaires as mere ‘agents,’ the concessionaires were able to pass on to the consumer business expenses and their own corporate income tax, they were not subjected to the 12-percent rate of return limitation for public utilities and they were not subjected to the normal auditing procedures of the Commission on Audit. Thus, there is an impending need to characterize the concessionaires as public utilities through an executive order pending review of the concession agreement,” Belgica said.
“We also need to seek assistance from the Commission on Audit to form a special audit team that shall audit the tariffs and rates imposed by the concessionaires through the MWSS, as well as their tariff and rate setting procedures,” he added.
Belgica also emphasized the need to terminate the Concession Agreeement, stressing that the agreement is detrimental to public welfare and interest.
With a reports from JORDEENE B. LAGARE